Regional Transfer Multipliers

Raphael Corbi, University of São Paulo, Elias Papaioannou, London Business School and CEPR, and Paolo Surico, London Business School and CEPR
Posted onNovember 18, 2018

A series of discontinuities in the allocation mechanism of federal transfers to municipal governments in Brazil allow us to identify the causal effect of public spending on local labor markets, using a ‘fuzzy’ Regression Discontinuity Design (RDD). Our estimates imply a cost per job of about 8,000 US dollars per year and a local income multiplier around two. The effect comes mostly from employment in services and is more pronounced among less financially developed municipalities.